Economic Growth Expected to Boost Health Spending

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Actuaries from the Center on Medicare and Medicaid Services (CMS) report that in 2013 health care spending grew slowly for the fifth consecutive year, yet it will likely pick up over the next decade with stronger economic growth and new insurance beneficiaries.

In measuring National Health Expenditures, the actuaries take into account spending by private insurers, government and individuals. Due to slow economic growth in 2013, private insurance enrollment remained static and consumers held back on health spending.

At the same time, Medicare spending slowed due to sequestration, reductions in provider payments from the Affordable Care Act (ACA), and lower growth in utilization of health services. This spending slowdown is nearly unprecedented.

The Congressional Budget Office suggested recently that Medicare spending per capita is actually falling when adjusted for inflation. However, Medicaid spending growth in 2013 — due partly to temporarily increased payments for primary care doctors — nearly offset the deceleration in spending from other payers.

Baby boomers signing up for Medicare and people benefiting from the ACA’s expansion of private insurance and Medicaid will put upward pressure on national health spending over the next decade. So will economic growth.

These factors could cause health expenditures to grow from 17.2 percent of GDP in 2013 to 19.3 percent in 2023. This growth rate, while lower than the historical average, will still put severe strain on the federal budget and should drive policymakers to act on health care reforms.

External links:
Health Expenditure Projections 2013-2023 (Health Affairs)
Per Capita Medicare Spending Is Actually Falling (N.Y. Times)

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